The Nigerian Investor As King

The Federal High Court in Lagos will on Monday, July 22, 2019, begin hearing of arguments between the lawyers of sacked group managing director of Oando Plc., Jubril Adewale Tinubu, and his longtime deputy, Omamofe Boyo, and the Securities and Exchange Commission (SEC).

The SEC had on Friday, May 31, said a report of the forensic audit performed by the firm of Deloitte and Touche revealed serious infractions. These include: “false disclosures, market abuses, misstatements in financial statements, internal control failures, and corporate governance lapses stemming from poor board oversight, irregular approval of directors’ remuneration, unjustified disbursements to directors and management of the company, related party transactions not conducted at arm’s length, amongst others”.

It, therefore, ordered the resignation of some board members, while barring Tinubu and Boyo from being directors of public companies for a period of five years, based on the allegation which the company’s management described as “unsubstantiated, ultra vires, invalid and calculated to prejudice the business of the company.”

Oando said its management was not afforded “the opportunity to see, review and respond to the forensic audit report and so is unable to ascertain what findings (if any) were made in relation to the alleged infractions and defend itself accordingly before the SEC.”

But the commission has since argued to the contrary, going ahead to appoint an interim management committee headed by Mutiu Sunmonu, a former head of Shell Nigeria.

Oando management obtained an injunction stopping the enforcement of the SEC’s orders, for which the commission has filed preliminary objection as well as counter-affidavit against the fundamental rights enforcement suit which Tinubu and Boyo, as applicants filed against it.

In the preliminary objection, SEC urged the court to dismiss the suit on grounds of lack of jurisdiction, non-compliance with conditions precedent as prescribed by the investment and Securities Act, no, 29, 2007 for instituting an action against the respondent and failure to exhaust the administrative remedy available.

In a statement to the Nigerian Stock Exchange (NSE), Oando Plc’s management accused the commission of not giving it fair hearing as in previous cases where it similarly intervened in the management of public companies, contrary to SEC’s claim.

Despite the alleged lack of fair hearing, Oando said its management “simply co-operated with the process and responded to questions posed by the auditors in the course of their fieldwork for findings in a report that the company has still not seen.”

Oando further argued that before the forensic audit, it “was not afforded the same opportunity to meet with SEC as was afforded to the petitioners, despite repeated written requests to that effect.”

During the 18-month long forensic audit exercise, the company insisted that it was never given an opportunity to present its case based on the concerns or findings of the Forensic auditor to the SEC, while in kick off meeting with Deloitte on March 29, 2018, they assured the Company that we would be allowed to read their report on the forensic audit and give further clarification or comments on matters raised in their report.

Reacting to Oando’s claims, a group under the aegis of the Consolidated Capital Market Stakeholders Forum (CCMSF), in a statement by Umar Usman, its coordinator, said the company initially resisted the auditors and only allowed the audit to proceed much later, “after they had taken SEC to court and questioned its powers to carry out the audit.

In a press statement, the management of Deloitte recently promised to publish its full forensic audit report, if it becomes necessary at some point, to set the records straight.

The Oando Plc press statement issued on Tuesday, 18 June 2019, the firm said “contains material factual inaccuracies relating to our conduct of the forensic audit as commissioned by the Securities and Exchange Commission (SEC).”

At Monday’s resumed hearing before Justice Faji, lawyers to SEC would expectedly draw attention to the provisions of Section 13 which empowers its management to perform all that it has done in the Oando Plc matter.

They will also be convincing the court of its powers under Section 13 (bb) of the Investment and Securities Act (ISA 2007) that Tinubu and Boyo are persons unfit to be employed in any arm of the securities industry, as affirmed by a most recent decision of the Court of Appeal in SEC v. Big Treat & 5 Ors Suit No – CA/L/88/2011.

The Lagos Division of the court upheld the powers of SEC to intervene in the management and control of public companies, under its power of investor protection, while maintaining a free, fair, efficient and transparent capital market.

The commission’s investigation into the affairs of Big Treat Plc a public listed company and its directors had shown several infractions of the ISA 2007 like the inadequate and total breakdown of corporate governance in the company and inadequate internal control systems.

Lawyers of the commission will also be convincing the court that Section 13 of the ISA 2007 empowers it as the apex regulatory organisation for the Nigerian capital market to undertake the functions prescribed in this Act, including regulating investments and securities business in the country as defined in the Act. They must also prove that the actions taken in the case of Oando Plc are in public interest, especially as it concerns investor protection; and in further bid to prevent “fraudulent and unfair trade practices relating to the securities industry;” among others.

The SEC must also establish that the implementation of Section 13 of the ISA is the responsibility of its management, just as the power to sanction erring individuals under Section 13 (u) and to levy fees, penalties and administrative costs of proceedings or other charges on any person in relation to investments and securities business in Nigeria, in accordance with the provisions of the Act.

According to the SEC, “The Commission’s recent action on Oando Plc aligns with the above cardinal mandate, as the directive for the removal of persons from the board of Oando Plc and the appointment of an interim management team to temporarily steer the affairs of the company are to protect investors and preserve stakeholder value.

“Failure or refusal of the Commission to act in the face of the serious issues thrown up by the investigations or to reverse its directives, would undermine the federal government’s agenda to build strong institutions and promote the transparency and integrity of the Nigerian capital market, especially given that these are preconditions for attracting foreign investors to the Nigerian capital market”.

When both parties square up on July 22, lawyers on both sides will seek to help the court decide on the allegations of unfair treatment as alleged by Oando, Tinubu and Boyo.